Identify Closing Procedures - Nationwide Multistate Licensing System NMLS

1. What is the minimum timing requirement for delivering the Closing Disclosure under TRID?

   At least 3 business days before consummation. TRID mandates this period to allow borrowers sufficient time to review the final terms and costs, preventing rushed decisions.

2. What is the primary purpose of the Closing Disclosure (CD) in a mortgage closing?

   Final, itemized loan terms and closing costs for borrower review. It ensures borrowers receive transparent, final details on loan terms and costs under TRID rules for informed decision-making before closing.

3. Which right delays funding on most owner-occupied refinances until after signing?

   3-business-day right of rescission. Under TILA, this consumer protection allows time to reconsider, delaying disbursement to prevent irrevocable commitments.

4. What is the main purpose of recording the mortgage or deed of trust in public records?

   To perfect the lien and establish priority/notice to third parties. Recording provides constructive notice, securing the lender's position against subsequent claims or liens on the property.

5. Which instrument is recorded to secure the lender's interest in a lien-theory state?

   Mortgage. In lien-theory states, it creates a security interest without transferring title, enforceable through judicial foreclosure.

6. What is the purpose of a payoff statement in a refinance closing?

   Provides exact amount needed to satisfy the existing lien by a date. It specifies the precise payoff figure, including per diem interest, to fully release the prior lien at closing.

7. Which instrument is recorded to secure the lender's interest in a title-theory state?

   Deed of trust. In title-theory states, it transfers legal title to a trustee, allowing non-judicial foreclosure if default occurs.

8. What does "funding" mean in a mortgage closing process?

   Lender disburses loan proceeds to the settlement agent/escrow. This step transfers the approved loan amount, enabling the settlement agent to complete disbursements and payoffs.

9. Which transaction generally does NOT have a right of rescission: purchase or refinance?

   Purchase transaction (no rescission right under TILA). TILA exempts purchases as they involve new acquisitions, not refinancing existing obligations on primary residences.

10. What is the promissory note in a mortgage transaction?

    Borrower's written promise to repay the loan under stated terms. It serves as the primary evidence of debt, enforceable independently of the security instrument.

11. What is the immediate post-recording step that confirms the lien is perfected?

    Obtain recording information and issue final title policy/endorsements. This confirms the instruments' official entry into public records, finalizing title insurance coverage and lien perfection.

12. Which instrument is recorded to transfer ownership from seller to buyer at closing?

    Deed (for example, warranty deed). It legally conveys title from seller to buyer, establishing the new owner's rights upon recording.

13. Which three changes require a new Closing Disclosure and a new 3-business-day waiting period?

    APR increase beyond tolerance, prepayment penalty added, loan product changes. These significant changes under TRID necessitate redisclosure and waiting to protect borrowers from material alterations without review.

14. What is the purpose of a title search before closing?

    To identify ownership, liens, and title defects that must be resolved. It uncovers potential issues to ensure clear title, mitigating risks for lenders and buyers before proceeding to closing.

15. Which party typically prepares the final settlement statement and coordinates signing and recording?

    Settlement agent (title company or closing attorney). They handle documentation, fund disbursement, and recording to facilitate a smooth, compliant closing process.

16. What is the purpose of owner's title insurance in a purchase transaction?

    Protects the buyer against covered title defects in ownership. It safeguards the buyer's equity and ownership rights against future claims or defects not revealed in the title search.

17. What is the purpose of an escrow (impound) account established at closing?

    To collect funds for taxes and insurance and pay them when due. It manages periodic payments to prevent lapses in coverage or tax liens, protecting the lender's interest in the property.

18. What does "consummation" mean for TRID timing purposes?

    When the borrower becomes contractually obligated on the loan. This definition under TRID aligns timing requirements with the point of legal commitment, typically upon signing the note.

19. Identify the term for a closing where signing and funding occur at the same time.

    Wet closing. It synchronizes document execution with fund availability, common in states requiring simultaneous completion for validity.

20. What is the general sequence of steps from closing to recording for a purchase mortgage?

    Sign closing docs, fund/disburse, record deed and mortgage/deed of trust. This order ensures legal obligations are met, funds are transferred, and public records reflect the new ownership and lien.

21. What is the settlement agent's primary duty regarding disbursement of funds at closing?

    Disburse per written instructions after required conditions are met. This fiduciary responsibility ensures accurate allocation of funds, complying with legal and contractual obligations.

22. Which document creates the lien against the property: the note or the mortgage/deed of trust?

    Mortgage or deed of trust. This security instrument pledges the property as collateral, creating an enforceable lien upon recording.

23. What is a closing condition that must be satisfied before a lender authorizes funding?

    All underwriting and closing conditions cleared and documents approved. This ensures all risks are mitigated and compliance is achieved before committing funds to the transaction.

24. Identify the term for a closing where documents are signed before the loan funds.

    Dry closing. It allows signing without immediate funding, often due to logistical delays or rescission periods in certain states.

25. What is the purpose of lender's title insurance issued at closing?

    Protects the lender against covered title defects affecting the lien. It indemnifies the lender for losses from undiscovered title issues, ensuring the lien's validity and priority.

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